A Conservative super fund is a fund that has less money invested in growth assets, such as shares and property, and more money invested in defensive assets like cash and bonds. Unlike a High Growth super fund, a Conservative super fund is designed to protect your super balance instead of aggressively grow it.
By investing more heavily in low-risk assets like cash, term deposits and bonds, a Conservative super fund still delivers a small level of growth but without much volatility. The investment returns will be much lower than those achieved by Balanced and High-Growth super funds, but your balance also won't fall by as much during periods of market volatility.
The difference between a Conservative and Balanced super fund is based on the fund's asset allocation. Both Conservative and Balanced super funds invest in a mix of assets, but Conservative funds allocate much less money towards high-risk assets like shares. A Balanced fund is generally the default option offered by the super fund and the one you'll be invested in when you first join the fund.
There's no exact industry standard around what is classed as a Conservative super fund versus a Balanced super fund in terms of asset allocation. At Finder, we classify Conservative super funds as those with less than 40% of their asset allocation in growth assets like shares. If the fund has between 40% and 60% of its money invested in growth assets, we'd then classify it as a Moderate fund. We classify a fund with 60% to 80% of its money invested in growth assets as a Balanced fund, and anything over this is a High-Growth fund.
There are two main ways you can invest in a Conservative super fund.
Most super funds offer a diversified Conservative investment option as an alternative to their default Balanced option. A diversified Conservative fund still invests in a mix of asset classes like shares, property, fixed interest and bonds, but its allocation to shares is much lower than other options (learn more about superannuation investment options).
Most major super funds also offer a range of single sector investment options as well as diversified options. Single sector investment options only invest in the one asset class. Some conservative single sector investment options include cash, fixed interest or bonds.
Single sector investment options are designed for members who want to be a lot more hands-on with their super.
Here are a few reasons why you might consider switching to a Conservative super fund.
If the thought of your super being invested in volatile assets like shares is going to keep you awake at night, you could consider a Conservative super fund instead. However, you need to be prepared for much lower returns and, as a result, a lower super balance over the long term.
If you're a few years away from retirement, switching to a Conservative super fund can be a good strategy. If you're going to access your super in a couple of years, you don't have much time for your balance to recover if there was a sudden market crash (like what we saw in 2020 due to COVID-19). If there is a market crash, your balance won't be as badly impacted in a Conservative fund as it would be in a Balanced or High-Growth fund.
If you're young (in your 20s, 30s and 40s), you have a lot of time to ride out any major market crashes. Because you have plenty of time for your super to recover from short-term periods of volatility, it's generally recommended that you keep your super invested in a Balanced or High-Growth super fund while you're young. This is because you want your super to be growing as much as it can while you're young and working, and the longer it's invested in growth assets the longer you'll benefit from compounded investment returns.
It's also generally not a great idea to switch to a Conservative super fund after a major market crash. If the market has already crashed, by switching out of a Balanced or High-Growth fund into a Conservative fund, you're just locking in that investment loss. Plus, if you're not invested in shares, you'll miss out on the growth when the market recovers (and if history is anything to go by, the market always recovers). This is why during the huge COVID-19 market crash in 2020, the general advice was to keep your super where it is.
You can switch to the Conservative investment option offered by your current super fund via the fund's mobile app or the online member portal. You can switch investment options at any time.
If you don't want to switch to the Conservative investment option with your current super fund or if you don't have an existing super fund, follow these steps.
Have you decided a Conservative super fund isn't what you're after? Learn about High-Growth super funds instead or take a look at our best super funds picks for a range of different options.
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